Gsk- a Merger Too Far
Core issue:
The case describes the events which lead to the merger of two large pharmaceutical giant Glaxo welcome and SmithKline beecham which lead to the formation of the entity GlaxoSmithKline. The core concern of the case is that although the newly merged company has invested heavily in R&D there is little evidence of success.
Identification of supporting issues:
These are some of the other issues that came up in the case which lead to the overall lack of success:
* Significant overlap in the product portfolio of the amalgamating companies * Few interesting medicines were launched but none of them were considered blockbusters * The company was lacking a distinctive identity * Keeping the stakeholders tolerant * Organizing 15000 scientists worldwide for efficient yet effective research
All these issues can be narrowed down into four broad strategic issues: * Cost Reduction * Breaking up the pipeline * Effectiveness of R & D * Economies of Scale
Cost reduction
Top executives anticipated the combined company would save an annualised £1 billion after 3 years.
These savings would come on top of previously announced restructuring at both companies, expected to cut a combined £570 million a year but the analysts were disappointed by the company’s estimates-They estimated the savings to be between ₤1.1 billion to ₤1.5 billion.
Savings were ₤1.8 billion after two and a half years which increased the trading profit margins to 35%
Breaking up the pipeline
To deliver the most cost efficient research organization in the pharmaceutical industry Glaxo Wellcome’s investment in technology to automate the chemistry of developing drugs combined well with SB’s leaderships in genomics. SB had an existing pipeline of 4 promising drugs in final stages of developments. This was attractive to Glaxo Wellcome who relied heavily on its blockbuster drug Zantac.
Performance improvement
GSK invested heavily on
The case describes the events which lead to the merger of two large pharmaceutical giant Glaxo welcome and SmithKline beecham which lead to the formation of the entity GlaxoSmithKline. The core concern of the case is that although the newly merged company has invested heavily in R&D there is little evidence of success.
Identification of supporting issues:
These are some of the other issues that came up in the case which lead to the overall lack of success:
* Significant overlap in the product portfolio of the amalgamating companies * Few interesting medicines were launched but none of them were considered blockbusters * The company was lacking a distinctive identity * Keeping the stakeholders tolerant * Organizing 15000 scientists worldwide for efficient yet effective research
All these issues can be narrowed down into four broad strategic issues: * Cost Reduction * Breaking up the pipeline * Effectiveness of R & D * Economies of Scale
Cost reduction
Top executives anticipated the combined company would save an annualised £1 billion after 3 years.
These savings would come on top of previously announced restructuring at both companies, expected to cut a combined £570 million a year but the analysts were disappointed by the company’s estimates-They estimated the savings to be between ₤1.1 billion to ₤1.5 billion.
Savings were ₤1.8 billion after two and a half years which increased the trading profit margins to 35%
Breaking up the pipeline
To deliver the most cost efficient research organization in the pharmaceutical industry Glaxo Wellcome’s investment in technology to automate the chemistry of developing drugs combined well with SB’s leaderships in genomics. SB had an existing pipeline of 4 promising drugs in final stages of developments. This was attractive to Glaxo Wellcome who relied heavily on its blockbuster drug Zantac.
Performance improvement
GSK invested heavily on